West Tankers Revisited (3): Damages For Breach Of Arbitration Agreement

The Commercial Court has found that an arbitral tribunal is not deprived of its jurisdiction to award equitable damages against a party that breaches an arbitration agreement by bringing proceedings in the courts of a Member State, even though an anti-suit injunction against such proceedings is incompatible with EU Regulation 44/2001.

Background

This decision is the latest instalment in a dispute between the insurers of charterers of a vessel ("Allianz") and the vessel's owners ("West Tankers") following the collision of the vessel with a jetty in Italy. Although the charterparty was subject to English law and contained a London arbitration clause, pursuant to which arbitration had been started in England, Allianz commenced proceedings before a court in Syracuse, Italy. West Tankers obtained an anti-suit injunction from the Commercial Court against the claim in Italy. However, this was set aside following the landmark ECJ decision, which ruled it incompatible with EU law for a court of one Member State to grant an anti-suit injunction against the court of another (click here to see our previous Law-Now on this issue).

Subsequently, the arbitral tribunal issued an award for a declaration that West Tankers was not liable to Allianz and the Court of Appeal confirmed that declaratory awards can be enforced in the same manner as a judgment, regardless of the ECJ ruling (click here to see our previous Law-Now on this issue).

In the most recent development, the tribunal dismissed West Tankers' claims that it should recover damages or an indemnity in respect of the costs it had incurred in the Syracuse proceedings from Allianz, as they were commenced in breach of the arbitration agreement. However, on appeal (pursuant to section 69 of the Arbitration Act 1996), the Commercial Court found that, in dismissing this claim, the tribunal erred in law, and should have at least deferred a decision on the claim.

Judgment

Flaux J's judgment analyses in detail the ECJ judgment and the preceding Opinion of Attorney General Kokott and uses these to explain his view that the ECJ decision and the Regulation do not extend to private arbitral tribunals.

Flaux J notes the reluctance with which it appears the tribunal came to its decision, and that the majority of the tribunal concluded that its jurisdiction was circumscribed by Allianz's right to bring proceedings before the Italian courts under Article 5(3) of the Regulation. Flaux J surmises that the tribunal...